U.S. Insurer of Pensions Has Lost $2 Billion

[Omaha Steve]

http://www.nytimes.com/2008/10/23/business/23pension.html?_r=3&ref=business&oref=slogin&oref=slogin&oref=slogin

By MARY WILLIAMS WALSH
Published: October 22, 2008

The federal agency that guarantees pensions has lost $2.1 billion on its investments so far this year, foreshadowing expected losses among corporate pension funds, state retirement systems and others that provide a financial backstop for an aging population.

The loss at the agency, the Pension Benefit Guaranty Corporation, was magnified by its decision in February to invest more aggressively to narrow its deficit. With unemployment rising and more companies coming under financial pressure, the agency will undoubtedly face more claims from companies that cannot make good on their pension promises.

The stock portion of the agency’s roughly $68 billion investment portfolio fell in value by $2.2 billion through August. Small gains in the fixed-income instruments offset part of the loss. These results do not include the devastating market swings of September.

Representative George Miller, the California Democrat who spotted the decline, said it stood as a warning about what could happen to any body of government if officials decided to invest the funds backing up a safety-net program in volatile securities.

“There has only been one guarantee in this financial crisis, and that is that Social Security did not lose money in the market,” said Mr. Miller, the chairman of the House Committee on Education and Labor. “The current market turmoil is proof that we should not subject our basic retirement security to a riverboat gamble.”

The information about the losses came to light as the committee prepared for a hearing on Friday on jobs and the economy. Mr. Miller said he had added to the list of those who would appear the executive director of the agency, Charles E. F. Millard, so that the committee could ask him about the its decision to put more money into equities. He recalled that Mr. Millard had previously told Congress that switching to more stocks would not add risk.

Mr. Millard said in an e-mail message that the agency’s losses were “well below the losses suffered by most other investors.”

FULL story at link.